Wednesday, November 23, 2011

Rocks, Hard Places for U.S. Mobile Service Providers

The next year will continue to be a story of being caught between rocks and very-hard places for a few of the leading U.S. mobile service providers. AT&T seems to be facing higher obstacles as it continues to try and convince regulators that its proposed purchase of T-Mobile USA would not harm competition.

The possible rejection of the deal might cost AT&T $3 billion in cash and an equivalent amount of spectrum. For T-Mobile USA, a failed deal means not only that it has failed to exit the U.S. market, failed to free up valuable capital that it needs to deploy elsewhere, but also has lost well more than a year of marketing blocking and tackling. The cash and spectrum might prove small consolation.

Sprint seems to have gambled its future on what the Apple iPhone can do for it, and continues to have a complicated relationship with Clearwire, which it owns, with 53 percent of the equity, but cannot control. Clearwire is running out of money, hasn't finished building its national WiMAX network and now says it has to build a Long Term Evolution network as well.

Clearwire also says it might not make a coming debt service payment, which would raise questions about whether bankruptcy is coming. Clearwire seems to want help from Sprint, which has pressing capital needs of its own, as it is pushing hard on a key network upgrade that will allow Sprint to build its own LTE network.

Sprint might be happy to see Clearwire restructure, under bankruptcy protection or not. What Sprint can’t afford is for Clearwire’s network to shut down. As many as eight million Sprint customers would lose service should that happen. But a chapter 11 bankruptcy would allow those services to continue.

Some argue Sprint would do better to have Clearwire go into chapter 11 bankruptcy, then buy the company. If Clearwire files for bankruptcy protection, the company’s spectrum licenses go to the bondholders, though, not to Sprint. That doesn't mean Sprint could not then try and buy the spectrum from bond holders. But there is risk. Sprint, Clearwire

LightSquared still hasn't managed to satisfy the U.S. GPS industry that its own launch of LTE services will avoid signal interference with the GPS system. So much hangs in the balance for LightSquared and its wholesale customers as well.

No comments:

Post a Comment